Galileo was no saint and was partial to a fair bit of carousing.
But he was the father of experimental science, the sharpest thinker of his time, a great debater and a dismissive polemicist.
In 1663, he was condemned by the Vatican for heresy. The Vatican’s charge against Galileo read: ‘‘The opinion that the sun is at the centre of the world and immobile is absurd, false in philosophy and formally heretical, because it is expressly contrary to Holy Scripture.”
Galileo’s big mistake was not so much in taking on the Vatican, but rather how he did it.
He made a fatal error by publishing his heretical views in Italian, rather than Latin. At a stroke, he put his views beyond the Church and disseminated them to the public. Popularising heresy – rather than the heresy itself – was the greater sin, as it could do greater damage to the reputation of the sitting Pope.
Ultimately Galileo retracted, but was heard to say at the end: ‘‘Eppure, simuove’’ (‘‘Say what you want, it moves’’).
The vilification of Galileo for questioning the Church was a sign of the Church’s weakness, not its strength. The Inquisition coincided with the greatest mass conversion from Catholicism ever. If an institution can’t accept criticism, particularly scientific criticism, it’s in trouble. Dismissing critics as heretics is a bad sign. In recent weeks, economists, a reasonable bunch for the most part, have been attacked by a variety of sources and hounded like enemies of the people. The new ‘‘thought-crime’’ in Ireland is, apparently, ‘‘talking down the economy’’. It is unpatriotic. To even suggest there might be something wrong with the preposterous notion that one of the least densely populated countries in Europe can have the highest houses prices, is now heretical.
Even the Taoiseach pointed the finger at the ‘‘talker downers’’ the other week. He is as entitled to his opinion as the next Bass drinker and, because of his position, his views matter considerably more, but there is something unreal about accusing those who point out the blatantly obvious.
The truth threatens nobody and the truth is that the Irish economy left the miracle phase a few years ago and is now being sustained by hot air and cheap credit, largely driven by ludicrous valuations in the housing market.
It is also true that a small number of landowners are being enormously enriched by this. It is equally true that close to 30 per cent of the price of a new house goes back to the state in various different taxes and levies, and that our national budget is dangerously geared to the continued strength of the housing market.
Like the medieval Vatican, there are many vested interests that might significantly lose out if the truth were exposed. So, instead of analysis, they rely on dogma, accusing the dissenters of heresy. Indeed, if there is indeed a crime committed by these new heretics who are suddenly sceptical about the economy, it is that many of them were cheerleaders of the boom, up until recently, and only changed their tune when the herd itself began to turn.
So are the Taoiseach and the Inquisition right? Can the economy be ‘‘talked down’’? If it can be talked down, then we must have some idea from what level it is being talked down. The inquisitors maybe by looking into their pure hearts must have an idea of where the economy should be at.
They must be able to figure out where mass psychology begins and hard economics ends.
Let’s see what economic model the Inquisition is using. If the economy can be talked down, the implication is that there is some fundamental value which is the right value for GNP before the sceptical spread their rot. GNP is derived by adding up all the private consumption in the economy, the government expenditure, the investment and everything we export.
From this figure we subtract all the stuff we import. So which part of this equation are the ‘‘talker downers’’ affecting?
Obviously, government spending and exports can’t be affected by the ‘‘talker downers’’, so it must be investment and private consumption the Inquisition is referring to.
Assuming the Inquisition is right, it must be said that, if it is possible to talk the economy down, it must be equally possible to talk it up. But who was talking it up, panicking thousands of young workers to buy commuter homes for 14 times their salaries?
Who terrified thousands to get into life-long debts with their 100 per cent mortgages over 35 years?
The people responsible for this are those who ‘‘talked up’’ the economy precisely when it was overheating three or four years ago. Did they consider the long-term implications of their bubble rhetoric when they told our young workers house prices would rise 15 per cent and that they had better queue up to get in now before it was too late?
What we are seeing are two things playing out here. The first is the economy coming off the boil more quickly than many expected. That it might come as a surprise to the people in power is frightening, given the ample opportunity we had to examine economic cycles in other countries.
The second factor is that the miracle economy is likely to be exposed as nothing more than a massive overdraft and that the vested interests like the Vatican of old – can’t quite believe their days of coining it might be over.
So, instead of sitting back and figuring out what we do next, they accuse the sceptics of heresy – as if by frightening them, the problem will go away.
This is where real psychology comes in.
Ireland is on the cusp of a financial, social and ultimately political experience which might best be understood by the well-accepted five stages of bereavement outlined in 1967 by Elizabeth Kubler Ross in ‘‘On Death and Dying’’.
Initially, Kubler Ross, a Swiss doctor, intended to describe how we all deal with our own mortality.
She observed explicit stages that dying patients went through as they tried to come to terms with death.
Originally, the five stages were meant to describe how we all come to terms with our own deaths. Later, others saw the five stages as also being helpful in understanding the emotional state of those left behind – the bereaved.
But it is not just death that causes trauma; anyone who has lost their job, experienced a divorce or a break up goes through a similar process. We all go through some, if not all, of these stages as we try to come to terms with what is happening to us.
The five stages are denial, anger, bargaining, depression and finally acceptance. Only by getting to the acceptance stage can the bereaved finally get over the tragedy or the dying person come to terms with his own mortality.
Psychiatrists maintain that, on the journey through these stages, many people get stuck in one stage or another and need help from friends to get out of it.
The five stages also provide an interesting framework to analyse how societies react when they experience a significant fall in house prices and the consequent loss of wealth so shortly after a boom.
This plays out on a personal and political level. If you examine countries that have gone through a rapid debt-driven surge with all the partying, carousing and the feeling of omnipotence, and have subsequently fallen back to earth, the collective experiences also appear to go through these stages.
In Ireland, we are still in the denial phase. And the Inquisition’s attack on the ‘‘talker downers’’ has more to do with unhinged psychology than economics.
Given that we have four stages to go, we had better get used to more irrationality.
It is refreshing to finally see somebody speaking out about the astronomical inbalance in the property market, of which two players cannot lose: The lenders and the property developers. The lenders make money whether the borrower can pay their mortgage or not. If not, the borrower either ends up making more money for the lender in fees and higher interest payments on the unpaid balance, or the house gets repossessed in which case the bank sells the house and makes a fortune or the bank claims on the MIG. Basically they can’t lose. Unless of course the market crashes! As… Read more »
rumour has it that the revenue has had a run on P45 forms :(
There was a good bit of talk on the British TV over the last 2 weeks about housing. PM Brown announced that he would build a large number of houses in the next number of years. On C4 news there was a good discussion between the new Housing Minister, the Tory member and someone from “pricedout.co.uk” What i took away from it was a very short discussion about how if prices were to high and the first time buyers were having trouble getting on the ladder – then maybe prices would have to fall!!! The people who are controlling what… Read more »
Great observations Mr McWilliams And to be honest, I think a crash might give us Irish a kick in the proverbial backside. Which, in my opinion would do no harm. It seems to me that greed has eroded the soul out of Irish society. And with this obsession of materialism and property price insanity has come much division and discontent. Maybe a housing crash would stop this rent allowance discrimination madness which affects so many tenants in this country. I have set up a blog documenting “rent allowance discrimination in Ireland” . I would appreciate it greatly if you could… Read more »
Top article again David,you really have your finger on the pulse. Do you have any suggestions as to how things will pan out over the next few years? Will the recent immigrants really leave,or will they be the ones lean and fit enough to actually survive a recession(being debt free and and live a frugal lifestyle)? I believe we’re heading back into a period of high taxation. Do you think those who made all the money like land owners and property developers in the boom years will have to pay it back in the form of wealth taxes as the… Read more »
It’s nice to see that people are finally starting to realise the mess Ireland is in. For the past few years you’ve taken a lot of flack for being a cassandra predicting this, even to the point where your point of view was dismissed by Bertie in the Dail. Have you noticed a sea-change in how your opinions are received recently?
First about Bertie : to my knowledge, Bertie Ahern has never provided a coherent argument about why he believes the negative commentry is wrong. You see, Bertie doesn’t do reasoned coherent arguments. His remarks are usually about as clear as the mist rolling in over the Mull of Kintyre. He never makes an argument – he just huffs and puffs. I think the reason that his reaction now is a bit more significant is that he knows the Emperor is rather scantily clad. He knows in his heart that the Celtic tiger is merely concealling a very grave sickness. So… Read more »
Leaving some of the emotional huff-and-puff aside (including the tenuous inference of the stages of bereavement onto public sentiment), considering the “hard” economics ought to be about the trends in the property market. Is this a phase of correction, a blip or a crash? What are the factors to consider? For instance, if interest rates are coming of a very low base, credit remains relatively cheap, thus not a serious dampener on house prices. If the market is flooded with sellers, the crash has arrived. If construction is slowing down significantly, supply-side will lag in the medium term thus support… Read more »
It has been interesting over the last few years the reaction to anybody daring to question the irish economy and its fundamentals, how dare you, a nationalistic fervour has become attatched to it. Its like the economy is viewed in the same way as the irish soccer or rugby team and you david are its eamon dunphy. The ending of the construction boom is viewed in a totally different light to the ending of the high tech boom in 2001. Then high tech graduates losing their jobs or unable to find work was viewed as a bit of a joke,… Read more »
Thanks for all the comments. Any ideas of how we are to get out of this mess? Best Regards, David
Hi David, How to get out of the mess where the government, particularly the Taoiseach, and the vested interests keep on telling us that black is white? The only thing I can imagine is that members of the public support the more unbiased commentators. On any rare opportunity that Joe Public gets to air his views – whether a phone-in, a letter to the paper, or when he talks to his bank manager or his TD, – he can let them know that he rejects the notion that all is well with the economy and that he is suspicious of… Read more »
As always, you write in a wonderful, readable style. I’m not so sure about the gloomy prognosis, but agree with you on the “talking-up” point…I made a point on my own blog some time ago, about how the Irish Times and it’s ilk are so beholden to the property “experts”. And how statistics were being twisted to suit the official version. How the wiggle out of this one is anyone’s guess!
I watched the dotcom boom from abroad, returned briefly in 2002 to Dublin before moving to London. My journeys home through the hype have been great craic as my mates careers have been forged and money could easily be made,borrowed and spent but believe me the last six months have seen a change.Maybe its just my peers getting older but the swagger has definitely been in decline. It’s just a reality check though I think. Those who speculated in property with no genuine exit strategy (every small time buy to let) are in serious difficulties, but then common sense should… Read more »
Neil, Your last remark is pretty nasty “roll on the disaster”. Would you really take delight in seeing other people lose their homes? You seem to be saying, correct me if I misread your post, that you would revel in seeing the housing market bust – i.e not just cool off or slowly slide back to sustainable growth, but nose dive. Say a 30% drop in prices, and a collapse in the building trade would be a serious shock to the economy. 100,000 employees in the building trade would be immediately hit. Then add estate agents, not just their owners… Read more »
The lazy rhetoric of the estate agents has always been that prices will continue to rise as they have done over the last ten years. It is very easy to see that this is insane and stupid, just by applying simple maths. I believe the average annual increase over 10 years has been 14.5%, a truely stupendous figure. If that was continued over the next 10 years, and you apply it to the average Dublin house price of 427,000, then the average Dublin house would cost 1.4m in 10 years. Gulp. Extending the analogy even further, by the time those… Read more »
Ciaran, Nasty? Not so, but do think we have suck it up. It’s part of the open economic model? Not reveling in it, perhaps a little exasperated by the coverage given to those in denial. We all have an interest in a healthy economy but the increase in our house prices isn’t healthy for the economy. It was an enjoyable ride but when you realise you could no longer afford to buy 1/6 of your own home then something just doesn’t stack up. It makes me nervous and a lot of other people too from what i’m hearing (I’m posting… Read more »
3 points I’d like to make about the “talker-downers” 1. Most of those I know do not take any pleasure in what’s happening currently other than in being right. 2. They would not have been warning people about this for several years if they wanted people to get burnt in the bubble. 3. If you think you know something that others don’t, the best way to profit from it is to keep your mouth shut. Many of the “talker-downers” have been open and vocal about the problems for years. On the other hand, property vested interests have been “keeping mum”… Read more »
A slight (friday) diversion but as a “talker-downer” myself there are a few reasons I would not like to be associated with Galileo Based on more recent scholarship many of the myths around this episode are being challenged. It would seem according to some more recent publications that: 1. He was a troubled and stuborn genius and his arrogant approach to authority caused much hurt to himself, his family and his friends. 2. He had a close friend, admirer and protector in the Pope at the time and yet Galileo lampooned and alienated him.. 3. Galileo’s scientific theories were not… Read more »
I think that Ireland is possibly heading for the worst housing market crash is all history, making the Japan property bubble look trivial in comparison. House prices were inflated to completely grotesque levels and mortgage lenders were becoming frankly reckless in the lending practices – this credit splurge and massive build up of debt, as David rightly pointed out in his writings, caused Ireland’s economy to develop an asset bubble that reflected the sentiment in this country bordering on insanity towards housing and investment in property. I think that in coming years will do propound collective psychological damage to en… Read more »
Bertie will be busted by the tribunals, so he’s going to step down soon enough. Besides, his views on this issue are irrelevant. What is relevant is the unfolding disaster in America. The entire state and nation are insolvent, in hock to China and Japan, and headed straight for bankruptcy. The US housing market peaked in late 05, stayed on a plateau for about a year, and is now unwinding with increasing vigour. The overstretched American consumer is in torture. Wall Street analysts keep banging on about how the sub-prime mess is contained – but every day brings evidence of… Read more »
Even when the Titanic was sinking the band still played on … and so too it seems are the ‘spokes persons’ for property industry. They are playing the verbal tune of ‘we are going to have a ‘soft landing’.
Sorry, not true! Listening to and watching friends who are selling property at the moment in both Dublin and Cork cities, and they ARE accepting bids of up to 20% lower on their asking price for the sale of their properties! They are getting out … property prices are crashing …
A newspaper editor here in Spain asked to write something about how the Banco de Espana has sold off two thirds of thie gold reserves to help finance the current account deficit, which has ballooned to 9.5% of GDP http://www.financialsense.com/editorials/phillips/2007/0523.html I felt IÂ´d better check how our own is before I weighted in too heavily. Its ,,, ahem ,,, not too good at 125 of 145, being lower than Ethiopia (Do they know its Christmas), Albania (Hasnt everyone gone to live in Italy) and Myanmar (not much of a tourist industry there) http://en.wikipedia.org/wiki/List_of_countries_by_foreign_exchange_reserves Now I know “lies, dam lies and… Read more »
David great article of course you are risking getting the sh-te knocked out of you where ever irish property millionaires gather which could be pretty much anywhere you go in Ireland or Florida .Ive watched with amazement the ascent of irish home values et al since the early 90’s when returning to Ireland from the so called disaster waiting to happen ,that is ,the US, was still a prospect.I could never figure out how this could occur without wages matching the increases there by removing Irish competiveness on the global scene especially against emerging economies. Of course 45 year mortgages,more… Read more »
Great article, when I read it in 2002. Then interesting in 2003. Tedious in 2004 … etc.
Still lots of “talker downers” responding though, so well done for keeping the vibe alive.
I would say one thing to the pats-on-the-backs above:
This is a golden time in our history to get out there and make lots of cash. The less time you spend repeating Davids articles back to him and actually working while the jobs are here, the sooner you’ll pay off your mortgage..
Well said.Entirely correct. Like a drunk who is in denial of that booze is affecting his marriage, his job, and his savings. We are in trouble with respect to a ridiculous lifestyle, fast living, childish phsycology and addictions. I have read more sense in your article than in the collective output of RTE, and the entire Irish print media (excluding Shane Ross, Emer O’Kelly, Phoenix magazine, and the Sunday Business Post) for the last twelve months. The whole things is like the type of ‘mindwash’ that exists in the US mainstream media. Property was not moving before the media realised… Read more »